In a stock frenzy that has erupted on both sides of the Pacific Ocean, shares of Chinese media, Internet and telecom stocks have soared this week.
The remarkable boom means that China’s media moguls have added $50 billion to their personal wealth since the beginning of 2015, according to Bloomberg estimates.
Hong Kong-traded shares in loss-making Alibaba Pictures Group made this week’s most spectacular gain. The shares returned from suspension after the company said that its corporate parent, the Chinese e-commerce giant Alibaba Group, might inject it with more businesses, including a crowd-funding platform. Alibaba Pictures shares leaped 34% Wednesday and a further 12% Thursday.
At HK$4.39 per share, the unit is now valued at HK$68 billion, or $8.77 billion. That makes Alibaba Pictures, which last year lost US$54 million, the most valuable film company in China.
In comparison, Huayi Brothers Media — which in 2014 recorded net income of $146 million — is valued at $7.9 billion, while Enlight Media is worth $5.98 billion and Bona Film Group, which made $17 million, is worth $542 million.
Hong Kong-listed companies were helped by a holiday-shortened trading week and an influx of cash from China. Mainland investors used up their full daily quota under a newish Hong Kong-Shanghai stock market link to buy Hong Kong-listed Chinese companies and push the Hang Seng stock index to five-year highs for two successive days. On Wednesday, the index gained 3.8%, on Thursday it gained 2.7% to finish at 26,944.
But the gains for the media moguls beat the index.
Tencent, which owns China’s major messaging services QQ and WeChat and is becoming a major media player, climbed 10% on Wednesday and then a further 3.4% Thursday to finish at HK$159.7 by the close of Hong Kong trading on Thursday.
Fosun International, the conglomerate backing Jeff Robinov’s Studio 8, gained 13% in Hong Kong trading on Wednesday and 2.2% on Thursday. That topped up the net worth of its boss Guo Guangcheng by an additional $1 billion.
Gains were also felt in New York, where many Chinese media stocks are traded either on the NYSE or NASDAQ markets.
Alibaba, which has been battered since February, was up 3.4% on Wednesday on the NYSE, reflecting recent data on the e-commerce market, the Alibaba Pictures talk and progress in its banking business.
Baidu, which operates China’s largest search engine, was up 4.1% on Wednesday. Online-video provider Youku Tudou was up 7.5% Wednesday, portal Sohu was up 7.7% and messaging and portal business Sina.com gained 8.7%. Game firms were particularly in demand, with Changyou up 4.5% and Sky-Mobi up 12.6% on Wednesday.
The rally has been short-lived, but may signal a re-evaluation of Chinese media stocks which, in North America have been out of favor for much of the past two years.
While valuations are again approaching stratospheric levels, two more years of profits growth at some companies means that their price-to-earnings ratios are less absurd than they previously were. And for many companies — and their mogul owners — the recent rally only recovers some of the ground lost in 2014.
The upcoming earnings season will show whether the newly reignited investor interest can be sustained.